Skip to main content

tv   Squawk on the Street  CNBC  September 26, 2017 9:00am-11:00am EDT

9:00 am
eye on absolute power corrupts absolutely. >> as far as the radar -- >> wow. >> they are big. >> regulators? >> that's who -- >> e.u., could be anybody. >> i've never said all regulation is bad. just too much. >> sam zell, thank you. >> great to see you. >> melissa, thank you. >> see you tomorrow. >> andrew, thank you i love my website. "squawk on the street" is next ♪ ♪ good morning and welcome to "squawk on the street. i'm david with sara eisen and mike santoli live from the new york stock exchange jim and carl both doing different things today but they will be back tomorrow. let's give you a look at futures as we get ready to start the trading session 30 minutes from now. you can see we are set up for what appears to be a higher open european markets they have been, well, let me see before i actually answer the question yeah, there it is.
9:01 am
kind of a mix. spain and france both slightly in the red the ten year note yield holding firm around the 2.2 or so percent. you can see at the bottom of our screen we've gotten that news. equifax's stock had been halted. rick smith announcing he will retire as the company's ceo. want to get more details on when that retirement is coming, whether it's immediate or not. of course, he's been undergrea pressure given the huge breech there for some 143 million or so potential accounts that were compromised. >> some might wonder what took so long. >> yes. >> already two technology executives left the company the week before last the stock has been in pretty much free fall >> today it's been characterized as retirements as well
9:02 am
>> it's a couple of weeks ago saying he certainly shoulding fir should be fired. he has been dismissed. take a look at the press release. i'm not clear as to whether effective today -- okay. thank you. mark felder, current board member mark felder is now chairman and there is an interim ceo. they will initiate a ceo search as mr. smith steps down as the company's ceo effective immediately. okay they probably should have gotten on that, as you said, a bit sooner they are certainly responding to pressure not just from shareholders but they are going to face a great deal of
9:03 am
questioning that's already begun on capitol hill. >> the criticism is twofold. one, how did they let this happen and then in the wake of this, how did they botch the management and response to this with certain missteps like preventing people from suing the company when they went on to look at whether their credit has been affected. now as a result they've got regulators from an alphabet soup of agencies, not to mention high profile ones like senator elizabeth warren who likes to champion consumer rights issues looking into how this happened, the accountability factor and why some executives sold the stock after the breech was discovered not to mention 30 state attorney generals looking into it it's also a problem that's gone global there have been revelations that brittains were affected and that canada's privacy commissioner is launching an investigation so they're going to have to be answering for a long time. >> it also seems as if whenever you have one of these -- a scandal where it's actually part
9:04 am
of the core business of equifax to guard private data, whenever you have this illumination on the business model itself, right? there's a lot of attention paid to how they were in the business of selling you protection against breaches and how crucial are all these agencies to the banking system, lending process, credit reporting and the rest of it they boast about all of the proprietary data that they have. in terms of the value of the business going ahead, not just how it was dealt with and who's going to manage it, is it a necessary piece? do we need to have the three of them >> of the system overall data collection becoming so important and the sale of data sara, you raised it, how the company could not have in place a specific plan to deal with the possibility of a breech let alone having allowed it. the journal did some good reporting in terms of when this was first discovered or it was a
9:05 am
cisco potential exploit in cisco software that they issued a patch for that clearly equifax did not get on as quickly as it might have or at least make sure that they had patched all the different potential areas and then every company is facing the breaches this one more serious than what we've seen yet equifax did not seem ready in any way to deal with it on the level of fixing it and communicating with their huge customer base to help them understand even right now people are very frustrated. >> and not also equipped to take the high road and say, look, whatever it takes, we're going to make sure that you the customer is not affected because what it really has come down to is we realize the customer is not the individual whose credit report data is in the system the customer is the banks and the other potential lenders. >> now i would assume, i don't know, the word retirement we kid about it
9:06 am
it's been dismissed. it has meaning for contracts that ceos have i have no idea what his employment contract looks like or whether there is going to be some focus on what he's getting as he leaves, but i would immediately assume the use of that word is not incidental and most likely means that he'll probably receive certain things that are in his contract as a result of retirement as opposed to dismissal for cause >> yeah. >> that's a story maybe for -- let's give it 30, 40 minutes at least to sort of look into that. paulina bare rowros who will be taking over led the asia pacific business and is going to be interim while equifax looks for a full-time ceo although oftentimes they do end up with the person who steps in as well. >> it is interesting so that release that went out a few weeks ago, susan malden, the chief security officer of
9:07 am
equifax, david webb also announced their retirement early on in this process clearly they found given the public pressure, outrage, stock price fall, et cetera, that wasn't enough. they have rebounded and they got confirmation at wells farg bow recently and the stock had a little bounce. it's been a pretty ugly few weeks. >> to mike's point, it's unclear what broader changes are in place for this industry. its competitors also taking a lit to a certain extent. >> remind me a little bit of, you know, following kind of the myelin and epipen pricing, wait, what's with all of the conflicting price data and the pbms you have the scrutiny on this and not just the behavior. >> let's talk broader now about stocks looking to rebound we'll keep an eye obviously on equifax into the open. stocks looking to broaden from
9:08 am
yesterday's declines shrugging off concerns about tensions between the u.s. and north korea. it was certainly a rough monday for technology including a 4 1/2 percent decline for facebook the worst performance since november 16. wall street will be featuring on fed speak. it's a keynote address by janet yellen let's bring in phil kamparelli and chief portfolio strategist lori heinell phil here, we'll start with you at post nine it was a tech fueled selloff yesterday. >> right. >> did you get the sense it was about some of the political pressures building around facebook or others or was it just a sell the winners type of selloff? >> it became a very emotional trade. i think technology was trading like staples why the heck should technology trade like that. what we're seeing is more reflation theme that we believe will force folks to take some profits on what has been a
9:09 am
tremendous run in technology the market has all grown up. i think investors are still tantruming here. every part of the world is growing right now. emerging markets is doing extremely well, yet investors are still sitting 70% of gdp is in cash. they're still on the sideline watching this happen behind them we believe that the pain trade is really a melt up in prices, not a melt down in prices on a broader scale. >> lori, this movement that we've been talking about, this pull back in the tech names that have been leading the way comes in the context all month of kind of a reversal of fortunes trade, right? the top sectors for the last month have been energy, telecom and materials. basically the smaller beaten down stuff are we seeing kind of a momentary shift, people just kind of trimming and changing positioning on a short-term basis or as phil suggests, is this a re-evaluation of where we are in the economic cycle? >> i think it is a broad
9:10 am
re-evaluation. it's a broad recognition of where valuations have gotten to. tech is an over valued sector. what we're really looking for are those areas where you can get outside growth health care where we think the innovation opportunity gives you growth, we like financials where we think the combination of an improving global back drop coupled with interest rate globalization and less regulatory pressures give you room and we like the consumer discretionary where you can see disintermediation, technology and consumer experience. >> although, you know, lori, when you say over valuation when it comes to technology, some of the names down yesterday whether it was apple, alphabet, or facebook you can make an argument that all of them traded multiples that were appropriate if not perhaps below what they should be given the growth rates themselves. >> you can but you still have to look at the risk/reward. in some cases those stocks were priced for perfection. they had to continue to grow in
9:11 am
the trajectory that they've enjoyed in the past. while that may be true, we're finding better values and better valuations in other sectors of the market. >> phil, do we have any sense when you see a day like yesterday how big of a role the algorithms were playing and whether they're just -- somehow it's buy stuff that's been down and sell stuff that's up >> yesterday was a function of an emotional trade in those names. everybody is talking about a cocktail party, right? this year has been about companies being rewarded for beating earnings and being punished for missing earnings. if that's the case and that's going to continue to happen, these technology names will be fine if they meet earnings that's what's different in 2017 versus prior years when a lot of the stuff was based on very low interest rates and quantitative easing those days are over. >> to david's point, we did see big winners, the russell 2000 which had lagged ended at a record high. general motors had a good day. the stocks that were falling behind -- >> i think that's part of the trade that folks are trying to figure out if it still worked.
9:12 am
the trump trade for us would be small capital over large cap higher interest rates and a stronger dollar. we're going to see if that stuff that was 0 for 3 will play outgoing into the end of the year the negotiation period has started. we don't need the trump trade for the u.s. outlook to be pretty steady between 2 and 2 1/2% growth. >> do you think if hillary clinton got elected the market would be up this much? >> tough question. tough to know. i think interest rates would probably be a little bit lower, okay i'm not sure if the fed would be in the position to be doing what they're doing now. i think interest rates would stay pretty low. >> lori, the global growth theme has clearly been out there for six months there's been an acknowledgment that most of the countries are growing pretty well for the first time in several years. has it mostly benefitted investors in non-u.s. stocks obviously they've out performed. is that the trend or are we going to base it on what the dollar does? >> we think risk assets are poised to do well and equities in the fourth quarter
9:13 am
generically have done especially well we're encouraged by the back drop and we think that equities around the world will participate in that. we have at the margin been favoring non-u.s we've been inching up e.n. and eurozone stocks and that's been an attractive place to be. we think this is about the risk/reward balance. finding the areas undervalued. finding the areas that can participate in a disproportionate way with that growth and being a bit defensive. >> all right we'll leave it there, guys thank you so much for kicking off the morning market discussion with us phil and lori. want to check in on equifax because it did resume trading. this is in the pre-market. market opens in 15 minutes' time we've just got word that the ceo of the credit reporting firm equifax will be retiring ceo richard smith. that actually comes a week before he was expected to be testifying before the senate banking committee. and that is, of course, after the revelation that 143 million
9:14 am
americans were exposed to a hack with some of their most sensitive information like social security numbers exposed. we'll see how the stock does it's down 25% for the month and it looks like it's going to open lower by a little more than 2%. still to come on the show, more on the equifax news plus the latest on president trump and the nfl. he's still tweeting about it also ahead, microsoft ceo satya nadella joining us as the company goes full speed ahead with its cloud strategy. taking another look at futures ahead of the opening bell looks like a rebound dow futures up 48. s&p up 4 tech field selloff yesterday more "squawk on the street" live heyswh wt 9 at t ne ene return is the monolithic view of emerging markets obsolete? at pgim, we see alpa in the trends,
9:15 am
driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential.
9:16 am
9:17 am
we'll get to lots of news involving the nfl and president trump in just a moment including the new tweet in just a moment some new developments regarding the league and facebook. our julia boorstin is here with details at post 9. what a treat welcome. >> great to be here, sara. facebook and the nfl are announcing a multi-year worldwide programming partnership. now this deal is not for live sporting events. those rights are tied up for
9:18 am
years. the nfl will publish game recaps and content from nfl films on facebook's watch platform. you'll be able to find those videos on facebook starting now. users can access those highlights by following the nfl or its 32 clubs. no official comment from the nfl or facebook on the financial arrangements, but a source close to the situation tells me that facebook is paying the nfl an up front minimum guarantee against ad sales and will sell midrole ads on those videos. this comes as the nfl struggles with concerns about ongoing ratings declines after last year's regular season ratings dropped 8% on average and now, of course, the nfl and the players are in the cross hairs of president trump as well for facebook remember its stock tanking 4 1/2% about russian ad purchases and its handling of fake news. for facebook it's valuable premium content. exactly the kind of video that advertisers want to be placed next to.
9:19 am
so far free from concerns about brand safety and fake news and it could help build viewership of facebook's new watch video tab which is designed to draw tv viewers and tv ad dollars. with concerns about a new generation of tv viewers not caring enough about sports to pay for a bundle of cable or satellite tv, this partnership could help or could at least aim to get more younger viewers interested in football guys >> interesting so as i understand it, it's nfl films video clips, right it's not as if it's clips from the games as broadcast -- >> well, it's both it's not live games. >> right >> we have to remember those rights are tied up for a while and very expensive. >> yes >> it's clips from the games also nfl films, videos that are edited together. >> stuff that doesn't get around on an immediate basis. >> yes. >> the nfl films stuff ideas that if you're an nfl fan or if they're trying to convert you to be an nfl fan, this is another way to watch remember, facebook is investing
9:20 am
a lot in video they're paying for shows they're trying to get people to create original content. all about getting you to spend more time sitting there watching videos. >> and sharing them. >> the question is is it about to get you to stop watching the games in primetime, which is the source of all the controversy. >> i don't think it can really compete with that. i think if you want to know what's happening in real time in a game, you're not going to be watching all the clips on your phone. but if they want you to after the fact catch up or watch -- >> for people like me who don't want to watch the game but need to talk about it the next day. >> you're still working. and you have the advantage. >> know the players. >> i know it's good. >> all right >> some people anticipate some of these companies will do it's a technologically difficult thing to do. if they buy the rights to screens for 12 to 15 million people, i'm not sure they can get that done. >> i think by the time the rights come up which is 2020,
9:21 am
2021, i would expect the capability would be there. now remember if you are paying for a cable bundle you can log in and authenticate and watch anywhere this is a different deal we've already seen amazon bid on those nfl rates. they're going to be streaming ten games this season. we'll see how much facebook gets that as well. >> julia, thank you. julia boorstin the controversy surrounding president trump and the nfl and the national anthem of course carried over into monday night football last night the dallas cowboys and team owner jerry jones locked on and knelt on the field before their game with the arizona cardinals prompting boos from many of the fans. the cowboys and jones did stand up with arms still interlocked towards the national anthem. right there. moments ago president trump tweeted the nfl has all sorts of rules and rec gu lagss the only way out for them is to set a rule that you can't kneel during our national anthem a lot of focus on this
9:22 am
while tax reform is going on, while health care is being debated, while puerto rico is in distress, people -- some people saying it's something more than a. >> purpose distraction. >> distraction it puts owners from a business perspective like jerry jones in a somewhat difficult position. he supported the president in the past he can't turn his back on his employees. >> this particular tweet seems intended to incrementally provoke the nfl. previously the president was almost declaring victory saying, look, most people stood for the anthem people who booed those who were kneeling you thought that was an easy way to move along. now he's saying you either make a rule or this isn't over. >> i think that's the key thing. this isn't over. it's continuing and psychic energy. >> the op ed, the one who knelt
9:23 am
beside colin kaepernick is a good must read to what started this thing as we wonder about what the ratings impact on the business side will be. how long will the owners go with the players. >> hard not to when you've got almost all of your players -- they're the product. also -- >> he's the president. >> -- a piece on kaepernick a few weeks ago discussing the beginnings of his desire to do that let's get to some earnings here out from carnival cruise operator carnival $2.29. revenue was ahead of forecasts rran wlosures due to the recent huicesill cut current quarter profits by 10 to 12 cents a share. shares are looking up. we're back right after this. thousands of other traders?
9:24 am
i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. you know win control? be this guy. check it out! self-appendectomy! oh, that's really attached. that's why i rent from national. where i get the control to choose any car in the aisle i want, not some car they choose for me. which makes me one smooth operator. ah! still a little tender. (vo) go national. go like a pro.
9:25 am
( ♪ ) whoo! ( ♪ ) woman: class, let's turn to page 136, recessive traits skip generations. ( ♪ ) molly: i reprogrammed the robots to do the inspection. it's running much faster now. see? it's amazing, molly. thank you. ( ♪ )
9:26 am
equifax shares trading down. the company has fired its ceo, rick smith some say perhaps a bit late. they are calling it a retirement effective immediately. u n see the stock is down 2% we're going to have the opening belfour minutes from now
9:27 am
throughout my career, i've been fortunate enough to travel to many interesting places. i've always wanted to create those experiences for others. with my advisor's help along the way, it's finally my turn to be the host.
9:28 am
when you have the right financial advisor, life can be brilliant. ameriprise your bbut as you get older,ing. it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. the name to remember. reminds me of how geico hasd been saving people money for over 75 years. hey, big guy! come on in! let me guess your weight! win a prize! sure, why not. 12 ounces! sorry, mate. four ounces. i've been taking the stairs lately. you win, big guy.
9:29 am
sorry, 'scuse me! oh, he looks so much more real on tv. yeah... over 75 years of savings and service. get your rate quote today. you're watching cnbc "squawk on the street. live from the financial capitol. the opening bell will ring a minute from now. as we get started with trading on this tuesday. we were dealing with the equifax news at the top of the hour, sara we didn't hit oil like we typically do that's a story in our markets. the euro, one of your favorites. >> the euro is at a one-month low. we're seeing dollar strength there is the german election while merkel won her fourth term as expected, it's going to be
9:30 am
harder to build a coalition because the establishment party didn't get as much of a win as they usually do. so the euro has been hit the dollar is up brent crude oil spiked oil prices >> back up at the moment 52 bucks for wti has been an interesting market the euro dollar trade is also happening in the context of all the trends year to date. so far in november have been kind of turned upside down some saying sentiment is there oil as well. deeten down stocks and sectors have revived and you've seen a big, large into small growth into value for the last couple of weeks that's been the trend. >> you heard the opening bell there of course. you can take a look at the real time exchange. h-2. big board asset management group, columbia thread neatle investments. over at the nasdaq celebrating
9:31 am
its 50th anniversary and 45th listing anniversary. man. >> one of the early ones. >> a lot of material 45 years ago we've been following the equifax story this morning rick smith announcing his retirement effective immediately. interim ceo has taken over running that company my colleague, jim cramer is on the phone. always next to me in my heart, jim, but now somewhere else. a few weeks ago you said he should be fired immediately. took the board a bit of time, didn't it? >> yeah, it sure did it's interesting that they decided put an insider in, maybe get someone who frankly is not associated at all with this hack i think would be a smarter move, but obviously the company wasn't prepared for mr. smith to leave. frankly, i mentioned when i was on air, david, what does it take to get you fired in america? and i think the answer is
9:32 am
finally that you have the biggest hack ever and everybody's worried about their bank account and everyone's checking their bank account. this guy had to be sacrificed. everything -- buck stops with the top guy whether it be john stump at wells fargo or whether it be rick smith i know the stock's down. i think the stock is interesting. >> yeah, you know, i made this point earlier, jim, i don't know the answer haven't had a chance to look through their proxy and his pay, but sometimes that word retirement can be a way contractually to make sure he gets paid everything that he was due under his contract as owe pieced to, of course, being dismissed for cause. this would be yet another area of focus for people saying well now he's still getting paid a lot on the way out i don't want to rush for judgment and we'll take a look, but it is interesting, of course, the terms being used here as opposed to just saying he has been dismissed. >> yeah. i think that's important because, again, is this not a
9:33 am
cause event. you have the biggest hack in history. is that a celebration of retirement or is that something the guy should lose his job for. there are people on this board who are very sophisticated who understand both hacks and understand cyber security. i'm waiting to hear from them. i'm still waiting for some sort of congressional hearing i have senator warren recently and i know that senator warren is certainly let's say a gifted person when it comes to talking about a story. she thinks there should be a hearing about what happened to equifax. i would like to know what happened, particularly if it's just retirement, is there a call back does he get his bonus? these are things that i think america thinks about when they recognize, wait a second, more than 100 million people are compromised. we still want to know whether we are compromised. when are they going to strike, they being the bad guys. i think this is a real step off that they're losing mr. smith,
9:34 am
but i would still like to know -- yeah, have some of the details. retirement does say full payout to me. i think that's a shame it means the shareholders are going to get banked. >> listening to everything you're saying, it's not a clear case being that it's worth buying the stock granted, you say positive he's gone, but elizabeth warren can go on and on and on, can't she >> yes, she can. i think that there are issues that are -- that transcend mr. smith. i will say this. when i see this level of some sort of accountability i feel better because what it says is the company realizes how serious this thing got the two heads that they sacrificed before. people were under lilings. i like the stock more because smith is gone because i think there's more of a chance that there won't be a full blown investigation. i think the investigation
9:35 am
probably had more to do with the idea how does this guy lose his job? i think maybe senator warren should launch an investigation congress will say, wait a second, they addressed it. they fired the guy let's move on. firing being a relative issue. i suggested he spend more time with his family. >> well, we all should do that, jim. >> i've neglected my family at times and i got fired once when i neglected them it was hurtful, but i got to spend more time with them. >> i know. well, i look forward to spending more time with you, that means right here tomorrow at 9:00. >> i will be there tomorrow. >> mr. smith, i wish him the best of lucky hope he doesn't get the big bonus. >> appreciate it bye. >> do want to mention some breaking news here as it relates to some fraud in the basketball business college basketball, we're just getting word here, nbc confirming that federal prosecutors in manhattan have just announced charges against assistant and associate head
9:36 am
coaches of several prominent ncaa division i basketball programs along with business associates of major sports apparel providers in what is a fraud and corruption probe in college basketball we know that the arrests were made by the fbi across the country last night we will learn more about this noon today eastern time. the u.s. attorney's office for the southern district of new york will be holding a news conference don't know which companies were involved obviously, don't know which teams were involved or coaches, but this is sort of interesting. we're going to wait for word on this. >> do we know what the nature of the fraud that is alleged is due to >> no, we just know they're sports apparel providers. >> okay. >> so perhaps when it comes to uniforms, selling deals. >> sneakers. >> sneakers. >> pressuring players to wear one brand over the other
9:37 am
sneaker reps and bird dog scouts, it's been a messy world in terms of up and coming school athletes going to college and steering them one way or the other. maybe it's involved in all of that. >> not points shaving. >> doesn't seem like it. >> interestingly today is the day i was going to point out nike because it is reporting earnings after the bell. this is interesting. sell side analyst community still like it. the sentiment has been very poor a lot of negative headlines around nike. specifically the competition around under armour. weakness in the jordan brand and that's what people are looking for out of earnings this evening. balanced with what has been very strong results out of china and europe and some of the rest of the world. nike does, according to the bulls, have some catalysts like the new vapor max. they have the deal with the nba but they are suffering big-time competition from the lifestyle brand. that's what's working right now.
9:38 am
lifestyle versus athletics that is very much in adidas's favor. they have the ultimate secret weapon, kanye west. >> that's my opinion when it comes to shoes and fashion. not just an easy line which he has done for them which sells out in limited edition he wears adidas and the sneakers sell out instantly and so that's been a huge boon for the likes of adidas. >> keep hearing about a basketball shoe glut >> darden restaurant is down 3.3% eps in line. they had weaker organic growth comps, 1.9%. some folks concerned about olive garden in particular versus the two-year trend where they've been taking market share that perhaps has peaked. >> people worried about olive garden which is the driver of the total company comps hitting fatigue, haven't been able to meet the comp store sales,
9:39 am
target getting credit, darden is for cost controls and meeting the numbers. if you look at competitors like brinker, it's been very hard to sort of get any pricing in casual dining. the wear and tear of that process of competing on that basis. >> and traffic traffic decline. >> very hard to draw traffic. >> i was looking at the dow movers apple is at the top of the dow for a change we've been following this apple selloff which continued into yesterday's broader tech selloff. coming off of, what, down 5% week for apple i'm concerned about the iphone 8 and continuing. >> the 8, 8 plus and x they've never had three phones come out at the same time so it's not clear what's going to happen >> and correct or not, the concerns yesterday about apple supposedly telling suppliers slow down on orders for the x, you've changed the narrative from are there going to be enough of them to maybe there's too many it's a big open question everyone is very cautious of
9:40 am
that sell on the new effect of the iphone launches historically. we have a bit of bid in technology let's send it over to bob pisani. >> happy tuesday, everybody. s&p is over 2500 let's take a look at some of the sectors that are moving. once again, a little bit of rotation back in semiconductors have been weak. on the up side banks sideways, doing better biotech rallying energy is the big mover. folks, oil is near $52 that's a big, big story. apple is up 1% guys are right about this. some of those manufacturers, the component manufacturers for apple has had a very rough time of it over in asia, particularly in taiwan. foxcon is the biggest manufacturer in the world for electronics. they're down more than 10% their component manufacturers as well they're both down 10% or more in the last few weeks sunny optical makes camera parts
9:41 am
for the iphone that's been down in the last few days taiwan semi down a few points in the last few days. we'll see if they turn around overall. carnival, you heard about at that and what's going on the numbers were not bad for carnival at all. you can see carnival's recovery after being down post hurricane. we've had a number of companies that have been out since the impacts. carnival has cut fourth quarter eps guidance car max last week we talked about they had closed six houston stores for a week. i would say the overall effect is still fairly modest but still quite notable and certainly reportable by the companies. the equifax ceo retiring i think is important but there's two big questions here number one, what is the full extent of that hack? we still don't know. generally the' always worse than expected the second issue, how are they going to deal with the potentially billions of dollars of legal expenses and liabilities that we haven't
9:42 am
heard from the state attorneys generals yet man, i think that's the biggest threat that's facing the company right now here let's talk about this oil rally. we talked about a little at the end of the day yesterday huge moves up in the stocks. oil's rallied 10% in the last month. we've seen anadarko, marathon, devon, hess. up more than 10% overall some of the dow leaders moved aggressively chevron and exxon were up in the high single digits exxon is up more than 9% we've seen there's the line here. dow industrials there. exxon and chevron up notably this is a one-month chart. refiners at new highs. holly, valero, phillips 66 refining stocks have hit new highs. a real oil rally going on here supplies have been tightening. opec compliance has been increasing share activity is higher not as high as some feared demand is increasing a little bit. the question is is this rally
9:43 am
for real it's the biggest rally for the year look at the xle. etf for big oil names is up 10%. this is far and away the biggest rally of the year. we've seen many attempts to buy bottoms that have all indended n heart break. the good thing about it is investor sentiment is terrible nobody wants anything to do with this sector. money is very small. the energy and the s&p is only 7% right some analysts are saying it's improving and it's cheap i can't tell you how many times people have said this is an interesting bottom for oil skepticism is very high and that's the best thing that it's got going for it dow is p 48 points, david. >> skepticism abounds. still want to get to nestle holding an investor day. first under new ceo dr. snyder of course, responding in part to pressure from u.s.-based hedge fund third point led by dan loeb
9:44 am
which put a letter out to its holders indicating it had a 3 $1/2 billion push. today is a big push. other shareholders have been hoping for including confirming mid single digit growth for the company. 18 and a half percent. now the way we're going to get to those single mid-digit growth numbers and the profit margin numbers by certain divestitures and acquisitions, they say looks like they'll sort of shed as much as $10 billion worth of businesses at this point also talking about capital allocations and share buy backs. there had been a hope, i believe, on the part of mr. loeb
9:45 am
that they would perhaps front end the buy backs in a more significant way. maybe that will come in time overall, certainly seemed to meet many of the hopes and expectations that mr. loeb had argued for in his letter from june 25th where he said dr. snyder will need to articulate a decisive and bold action plan that addresses the culture and tendency towards incrementalism that has typified the country's prior leadership and resulted in its long-term under performance. one area that is going to continue to be an area of contention between loeb and nestle would appear to be that stake in loreal. let's call it 23 or so percent the company reaffirming the fact that it wants to keep it, it's had a great return on that and it doesn't see it at this point as a source of funds for re-allocating capital towards other businesses will loeb push them to get some outside opinions as to how they should move on that? that remains to be seen, but certainly this story in a sense
9:46 am
of an activist here with the largest company be in europe there is not over. and to refresh people, sara, we're talking about pet care, water, coffee, infant nutrition, so many brands that people in the state -- >> frozen. >> making a bigger push into frozen. >> which is interesting. people thought there might be looking to spin it off they're not. that was confirmed, that they're keeping that in fact, they've had a recent acquisition there, too >> they have. >> in the loreal steak, david, is the idea that they are happy indefinitely with just kind of hanging on to a minority stake there was talks that the whole country could be in play with the matriarch having died. loreal is down 3/4 of a percent. >> they are drawing the line there. it is interesting. i think there had been some expectation to your passion. they say they have an analyzed return which is a pretty good return over time
9:47 am
it is not intrinsic to the overall business so tlsz this argument being made by loeb certainly as well. they took the 29% stake back in '74 they did sell 6% of the company in 2014 and it has been a great investment, but loeb believes that you could do an exchange offer for nestle shares that would accelerate efforts to optimize its capital return. more to come it would seem on that part of the argument. >> as for the nestle share price reaction, somewhat muted i don't know is it considered a big and bold enough idea? and have we heard from loeb, third point? no comment >> no comment at this point from loeb let's head to the bond pits now. join rick santelli at the cme group in chicago rick >> good morning, david you know, the treasury market this year has found many long patches of trade where it just hunkers down yes, we can look at highs and lows, they're important.
9:48 am
closers are pretty flat. we're in one of those zones again, this time in the 220s this is the eighth session that we're kind of in the 220s. the fed gave us the highest yield closed at 228. mostly scattered at 223, 224, not far from where we're trading. we move higher to get back into that area. if you look at one week you can clearly see what i'm talking about. remember, that has the noise on top and below the actual closes, i'm just looking point to point. bund deals continue to close starting to widen a little bit correlations are key here. we need to pay attention listen, i had jean claude touchette, your movement, in his opinion, had nothing to do with the election there was no trading recourse in his opinion after the election all may be true. maybe the channels are getting a bit mixed but certainly looks to me like there was an influence
9:49 am
there. you look at a two day euro versus the dollar. we went from 1.19 1/2 to 118 also rather prominent move now if you look at the pound, i had to open it up. euro versus pound you have to go further back there are forces that are much larger than just the potential impact of the german elections they have their central bank, economy, a lot of things going on moving maybe towards less accommodation. we will have to see. but looking pretty good. finally, the dollar versus the chinese currency, the yuan this is since july we know before the big turn where the dollar is heading higher, we were at the biggest for a lot of different reasons the dollar is looking better sara, back to you. >> certainly helping the russell 2000 hitting a new high now. rick, thanks. coming up, a closer look at apple.
9:50 am
two weeks after its product launch launch the worst monthl
9:51 am
today, a focus on innovation starting with advanced manufacturing that brings big ideas to life. and cutting-edge transportation development to connect those ideas to the world. along with urban redevelopment projects worthy of the world's top talent. here and all across new york state, we're building the new new york. to grow your business with us in the southern tier, visit
9:52 am
we've been watching shares of apple up today but the stock is down more than 7% since the company's unveiling event of its new iphone a little over two weeks ago. three iphones, 8, 8 plus and the x. we are joined by apple analyst steven milanovich. some of the questions about the attorney over blown?
9:53 am
>> over reaction the fact is we aren't going to have a sense of a demand for some time, particularly with the xs which we think will be pretty popular not shipping until november recently visited 30 companies in taiwan and skrooeouth korea they're sticking by our assumption of about 15% unit growth in fiscal '18 and we think the x will be perhaps 1/3 of the mix which will help the average selling price. >> steve, where do you think the stock right now sort of implies in terms of the strength of this cycle? it's interesting you have a company in apple where earnings have basically been flat for three years. the stock has gone on runs of up 35%, down 35%, up 80% as sentiment changes. where does that sit in terms of expectations for next year >> that's a good point it's been p.e. expansion
9:54 am
the earnings estimates haven't changed that much. going forward we think you have to see up side earnings surprises. working at $11.15 of fiscal '18. i think the expectations are for a good upgrade cycle but i think the average selling price is probably higher than people initially expected we think china is going to rebound. that's going to be a key swing factor we think the company's gross margin might be up they've priced these up. so i think it will be a bit of a stronger cycle. >> where does apple fit in with fang we saw that whole fang fueled selloff yesterday. apple is so different in terms of the business of -- versus google or facebook and everything else. some of the political pressures building around those names. do you think investors get that? >> well, i think so. apple is a platform company and we would argue that's similar in a sense to what google and
9:55 am
facebook are it sells at a multiple it monetizes apple will have services to make money in hardware. they're really quite different while apple doesn't deserve the pei i would argue given that they monetize the software apple when it monetizes, we think it will, does well the key metrics for apple is is the install base growing yes. is the retention rate remaining high yes. as a result you could see pe expansion. there's still the potential to get nike or lulu lemon if it's seen as an annuity. >> they've been looking for that, steve, for a long time tim cook is always emphasizing the revenues from the subscription business business. doesn't seem to have taken hold yet. >> no. 15% of profit. they've talked about it doubling over four years.
9:56 am
if you don't sell iphones, you don't get the services maybe in a couple of years you sign up to a subscription to a number of apple products, including the watch and you just kind of get renewed every year, but we're not at that point, particularly because the carriers are the ones at that really sell the iphones. it's a limited control for apple. >> nike at 21 times earnings, apple at 7 bull on apple. when we come back we'll have more on the big story of the morning. rick smith is out as the ce off of equifax keep it here i count on my dell small business advisor for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪
9:57 am
9:58 am
9:59 am
♪ ♪ ♪ good tuesday morning welcome back to "squawk on the street." i'm sarahize s iziz sara isen >> just boat loads of data breaking consumer confidence for
10:00 am
september, shall we? we're expecting 120. 119.8. that's a good number and if we look at the most recent high level, it was march at 124.90. that was the best since december of 2000. richmond fed, 19 19 now that's a september number. 19 equals our february read and that was the best since 2010 finally, everybody's looking for what's happening with new home sales. for the month of august we're expecting a number that was going to be up 2 1/2, 3% we end up with a number down 3 1/2% 560,000 seasonally adjusted annualized units that's definitely a bit of a sequentially, 571 to 580 580 down to 560. down 3. 4 the exact percent. when we want to know the exacting details we head east and we talk to our housing expert, diana olick. diana, what do you see in this
10:01 am
thumb? >> ri -- number? >> i see a big miss. i am looking at a bright side which is the median price of a new home built in august $3,200 that's down from august of 2016. looking for the builders to get lower prices nearly 2% of newly built homes are under $150,000 on the other side, however, we've moved from 5.8 month supply to a 6.1 month supply 6 months is considered a balanced market. when you look at the existing home market nothing is for sale. you're looking at a four-month supply not a great read for builders in august but a little better on pricing. back to you guys. >> thank you, diana olick. equifax announcing the ceo rick smith retiring today following the massive data breech affecting millions of americans and their private information. earlier i've been discussing the word retiring and whether or not that would have an impact on
10:02 am
what he gets under his employment agreement i do have this to share with people a filing this morning from the company which indicates that while its board of directors is completing its independent review of this data breech, all decisions relating to the characterization of mr. smith's departure and any obligations or benefits owed mr. smith under the employment agreement or any planned program policy or practice of the company will be deferred until the board of directors completes the review so it's not clear that he's going to be getting what he may otherwise have been owed pending their continuing review of the data breech itself they also say he will not get his bonus for 2017. >> as jim cramer had hoped and expected and would be outrageous in terms of fueling further outrage. this decision for the ceo to retire at least seems like an
10:03 am
attempt to try to put a lid on it. >> yeah. >> show some accountability. >> let's bring in jeff sonnenfeld yale school of management, senior associate dean of leadership studies to sara's point, jeffrey, is this going to put a lid on it? >> no, it won't put a lid on it. it's a decent but tardy second step the first stepis debatable, whether or not you actually wanted to fire the cio, the chief information security officer, people who actually know what decisions were made and what went wrong. right now this board, i mean, uconn trast this with recent examples of crisis management. we don't have to go back to tylenol and david neil of jetblue, mattel, just look at mary barra, what she did as disaster she put the a team on it right now there's nobody on the show, nobody watching the show who has any idea who's going to
10:04 am
appear before congress very soon to answer questions who have four different regulatory agencies that want answers from the company. who in the world is accountable? who's going to testify is this interim ceo, is this board chair who stepped in in a bit of an interim role going to speak for the company? there's a good deal of confusion. this investigation, we haven't heard very much david until you told me now. by the way, good for you for breaking this news on what's the retirement plan but what is the third party investigation. who's doing it any other crisis we find out who the law firm is, what's the deadline, what are they looking at. we don't know are they issues of liability? they said this spring target settled its data breech. this enormous one, the net worth of this company, $9 billion, some people are alarmists, looking at upwards of 35 or $40 billion of liability hard to explain those damages.
10:05 am
people are taking a look at what the credit impact is, not of what you can't buy but what people are buying under your name, who's going to be accountable for these things. >> right as i heard you say it, we've got a lot to go here >> jeffrey, what's the board's role now and what are your expectations in terms of shareholder's view of that board of directors and their responsibility beyond, of course, the tenure of mr. smith? >> the board, you know, and there's some nice people on it that i know, i feel bad about this, but they've been negligent. it's not criminal negligence but there is a failure of management oversight. we had a survey on our cnbc sponsored caucus astoundingly 95% of the ceos said that the worst is yet to come and 91% of them said that rich smith should be fired 95% of them thought we need more government regulation on data security, which is that the privacy experts are even shocked
10:06 am
in the room. that's what the board needed to find out, how did this thing fail and what's being done to correct it here we are in march and i spoke to a number of professionals got the same request in march and the vendors made the patches right away in their vendor systems. people are shocked that this board was so distant from knowing what's being done that they had a third party vendor, which was the mistake in the office of personnel management breech, third party vendor that had vast reach into everything that opened up a lot of these gateways for penetration in fact, how come the intrusion, which was detected in may, was not studied. what was studied is over the summer, what was the summer homework of these top executives three of them, don't tell me they didn't know how could they not have known? the cfo and two presidents including one division president with indirect oversight over this were selling stock. 75 programs? stop it. >> there are going to be a lot
10:07 am
of questions there >> a lot of questions and they're lobbying congress this time to try to limit their liability over the summer knowing this is going to be a problem. >> broader question about ceos you brought up target. interestingly the ceo of target also resigned in the wablg of a data breach in trying to restore a data breech? is it more ceos stepping down as they get hacked? >> that's a good question. a board that got it completely wrong was jetblue firing david kneelman he took full responsibility. they had an operations performance issue. he took responsibility for, fixed it, the board still fired him. that was a big mistake mary berra, she put her a team on it, to try to fix it at gm. in that case there were many fiery deaths and horrible things to deal with
10:08 am
instead of anybody at the top being fired there, they fixed the problem and the board did the right thing. in target, the target example, we've had other problems, radioshack years ago and dave edmondson where there was an ethics issue sometimes the board will use a misstep to purge somebody they should have gotten rid of before that was the case in radioshack and the case with target, big problems in addition to the data breech greg stei 234 hnhoppel -- the d breech gave the board an excuse to act in this case he has lost legitimacy to lead he should be removed. >> we're going to give you time to come back with more examples on data breech stuff for now, jeffrey, we'll leave it right here thank you as always. jeff sonnenfeld. >> thank you. >> encyclopedic. >> he is. when we come back,
10:09 am
republicans planning to outline their tax reform plan. what we know about the possible overhaul and how the gop plans to pay for tax tax cuts. quick programming note coming up in the next hour, "squawk alley", 11:00 a.m. eastern time the ceo of miost, syacrofat nadella, joining our jon fortt. the dow is up 58 points. ♪
10:10 am
10:11 am
10:12 am
susan collins coming out last night against the graham-cassidy plan the administration is attempting to keep the focus on tax reform. we're expected to get an announcement tomorrow. joining us is donald marin from the urban institute and former acting cbo director. terry haines, head of political analysis terry, does the political calculus change after senator collins backed away from graham-cassidy, at least probably killing the chances of that latest repeal and replace attempt? >> i don't think the calculus changes for health care. i never had this as likely to happen i've been in the markets saying it was 10% likely to happen. so i still think it's unlikely graham-cassidy wouldn't have had any impact on tax reform anyway and clearly the focus for fiscal 2018 has been on tax reform for quite some time.
10:13 am
and i think that's where they're going to put the vast majority of their effort. they need to go back to their constituents in 2018 and say for both policy and political purposes we did a big thing to jump start the economy and help you in the bottom line and to them that's what tax reform is. >> are they going to be able to do that, donald? >> you know what, they set themselves up a heavy lift still sounds like they want to propose significant tax cuts for businesses that pay taxes through the individual taxes and for individuals. they're struggling to figure out how to pay for it and it's not clear they're going to be able to bring all the pieces together >> just another political question on this, terry. the alabama state gop primary runoff happening today mcconnell and trump, don't they need luther strange to win here to get another reliable gop sort of establishment vote on issues like tax what if it doesn't go their way?
10:14 am
>> well, if it doesn't go their way what they get is judge morin. i think he's going to be a vote in favor of tax reform and a pretty aggressive one, too so there's certainly some significance politically to what happens in alabama tonight, but i don't think that's really going to change the calculus very much on this. >> donald, getting to some specifics, at least what we think we know. maybe 20% on the corporate rate. taking down the top rate to 35 no longer able to deduct state and local taxes. you know, it's fun bey, getting way down the road here, there's 24 republicans and if you add up in california and new york, obviously blue states that would suffer greatly from the inability to deduct state and local intomorrow taxes any longer when you start doing math on things like that and others do you get to an outcome that says this thing can pass? >> this is the ice cream and spinach problem, right
10:15 am
most of the discussion has been the ice cream of the tax cuts which many people find it attractive when you get to the spinach of how you pay for it, it is very difficult to see things that are politically viable we saw the border adjustment tax. there's a perception in some circles that that hits democratic states harder, which may be true. as you mentioned, that also affects a lot of republican districts so the white house is going to gutt push back on that from both sides. >> terry, i guess the big question is how hard of an effort there be an attempt to pay for it, right? the question isn't necessarily will you need to pay for it but do they care too keep a plan revenue neutral at all >> our view has been from a year now that the plan would -- the plan would actually end up increasing the deficit by about 1% of gross domestic product and i think that's the direction
10:16 am
this is going in the policy and the political calculus here is going to be, you know, we want to jump start the economy. we want to do something bold we want to do something aggressive and we're not going to be so concerned about short-term deficit impact. i think that's what you get out of public statements from the big six over the past couple of weeks, and i think that's the direction this is going to go in the pay fors, the nitty-gritty work, the spinach as don calls it is going to end up being to the tax writing committees if they can get a budget this fall, and i think they're 70% likely they can, we're then at 70% likely they can get tax reform we're bullish but we're no unaware of the possibility that this might flounder either by thanksgiving because they can't get a budget or by the winter because they can't figure out what spinach they want everybody to eat. >> it's a changing set of facts. 70% that's the amount that you think they'll get for tax
10:17 am
reform. >> no, it's a two steppers they need to do this with republican votes >> let's leave it at 70% if they do that. >> okay. so where are you -- let me get an answer from both of you guys. i won't hold you to it because the facts change what percentage that we get tax reform by the end of the year? >> by the end of the calendar year it's 5 or 10%. >> 5 or 10 >> our view is that it happens in the first quarter of 2018. >> donald, you >> yeah, the end of the calendar year is really hard. this feels to me like a february, march, april kind of thing and even then you're starting to get the issues of what actually constitutes tax reform because i think you have to water down a lot some of the proposals that are out there at the moment i'd give 50-50 that something happens. >> something happens all right. again, we won't hold you to it i'm asking everybody just to get a sense. remember, the administration still says the end of the year they're still sticking to that. >> right
10:18 am
steve mnuchin, he's changed his time line a little more. he said august thank you, guys. terry haynes and donald marron. when we come back, the ceo of price lynn, glenn fogel will join us. "squawk on the street. stay with us
10:19 am
10:20 am
10:21 am
welcome back let's send it uptown to seema mody sitting down with the president and ceo of priceline, glenn fogel. >> hi, mike. we are right next to the skip global travel forum. we are joined by a leader in the online travel space, glenn fogel. glenn, thank you for joining us today. >> thank you forge having me. >> i want to get your thoughts on the updated travel ban. the most recent data from the commerce department shows a drop in foreign visits from the first quarter of 2017. a drop from europe, the middle east, mexico is this due to the travel ban? how does that impact your business which is truly international? >> there's so many factors that go into the way travel goes up and down i really can't comment on the correlation to that i will say we have round three
10:22 am
now with the travel ban. our position has always been we're a travel company so we're in favor of more travel, not less travel and we have our subsidiary can put people into 220 different countries around the world and every single place they have their own rules, regulations, what sort of documentation you would need or not need we're not getting into politics. we'll follow whatever rules there are for here or anywhere else we want to try and get as many people as possible enjoying the world of travel. >> price line,, hotels, that's where the big margins are. there's been an active margin about hotels going around just to get hotels to sign up and book hotels on their site. if that trend continues, is that a challenge for priceline? >> everybody would like their couple to come direct and not pay any marketing or expense at all. the truth of the matter is we're offering a service that levels
10:23 am
the playing field. when somebody comes to our site they're seeing the greatest breadth of possibility all the possible hotels and not hotels and they're seeing the prices and a service that's so easy to use. if you're a little hotel in paris and you they want to get that done, we're providing great services to these hotels we're actually improving the process, making it better for everybody. >> online travel has been a tremendously successful business price line one of the best performing stocks on the nasdaq since 1999 a voice of caution from some of your peers, true vag gee, trip, even shares of priceline were down 8% in august. some of that on the back of earnings what's going on there? >> i was a trader before i was at priceline i was at morgan stanley asset. i worried about price every day. as the leader of this company,
10:24 am
my vision, what i have to do is look forward to it and make travel easier mp i'm focused on that, not the day-to-day of the stock price. >> vacation rentals now continue to be the big travel trends. airbnb with the valuation of $31 billion. expedia, home away >> very long time. we have over 700,000 properties that are not hotels. there's a home, villa, apartment. if you want to get a place in the outer banks on a nice beach side house, we can get you that. you want the condo out skiing in the rockies, we have that. so we have a product that is exactly what you're talking about or we think it's better because when you come to our site you see all those type of accommodations you also see the hotels on the same page. so you can compare and contrast. you're a family, not sure two rooms, apartment, what should
10:25 am
you do we show that we're showing the reviews and we're not going to charge you a travelers fee. most important, everything is instantly bookable. >> airbnb has that option as well >> if you want to sent e-mails back and forth what else can you do in china? >> we have almost 1,000 employees. we're on the road to 1,000 employees in china we have three customer service centers in china we are localizing. we are making sure that the chinese outbound traveler, the chinese traveler is doing the best and making sure somebody going in bound to china has a great experience that's our strategy. all three aspects of china travel because it's such an important market to be in. >> yeah, clearly that's where the money is going we're going to have to leave it there. we want to thank you for your time, glenn fogel, ceo of priceline group. back to sara downtown. >> seema, thank you. we're getting headlines on taxes
10:26 am
and puerto rico. our ylan mui has been monitoring it from washington and joins us with the highlights. good morning, ylan >> reporter: sara, house speaker paul ryan saying they are focused to getting this done the house is frustrated by the health care bill in the senate it can still unite republicans so expect to hear them frame this as a way to help the middle class and also as a way to make american businesses more competitive which keeps jobs here in the united states. now i'm told tomorrow vice president pence will be joining house republicans during their tax reform retreat tomorrow morning. of course, the president will be meeting with members of the ways and means committee here in just a few minutes. what you're really seeing is the administration here working to sell tax reform, not just to the public, but also to make sure they have close relationships as
10:27 am
this process moves forward >> i'll take it ylan when we come back, it's the rise of the machines. a look at the resurgence of how computer trading is taking over the hedge fund trading "squawk on the street" will be right back the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss when you have the right financial advisor, life can be brilliant. ameriprise
10:28 am
10:29 am
good morning, everyone i'm sue herera here's your cnbc news update at this hour. defense secretary james mattis saying that the u.s. seeks a diplomatic solution to the north korean crisis. >> we continue to maintain the diplomatically led efforts in the united nations you have seen unanimous united nations security council resolutions passed that have increased the pressure onge the north. israel says a 37-year-old
10:30 am
palestinian opened fire at the entrance to a settlement outside of jerusalem killing three israeli men and critically injuring a fourth. back here at home, the florida keys hit very hard by hurricane irma will reopen to tourists on october 1st. the storm destroyed an estimated 25% of homes on the island power and water supplies though have been restored and while the key west and marathon airports have also been reopened. pretty amazing in such a short period of time that's the news update at this hour david, i'll send it back downtown to you. >> i will thank you. thank you, sue. the rise of machine-based trading is seeing a revival in popularity in the hedge fund industry a new study shows that after adjusting for volatility and risk, computers tend to out perform human traders. leslie picker joins us with that story. leslie >> reporter: hey, david. i want to introduce you all to the light cube
10:31 am
this year it's right smack dab in the middle of man's offices each of these dots shows the performance of an underlying strategy or market that they're trading in at any time the green dots indicate positive performance, negative is the red dots here. performance is a key theme that keeps cropping up in the quant industry when you look at the returns over the short and long term, one year, three year, five years, they do tend to under perform the broader hedge fund industry as a whole. as you mentioned, david, there is a study that man put together which adjusted for certain factors which did show that quant outperformed luke ellis, he talked about the future of hedge funds as a convergence between man and
10:32 am
machi machine. >> a good computer will always beat a good human, but a good human with a good computer will beat a computer at chess if you try to do everything manually, you are going to get beaten by people who use quant technology >> so with all of this under performance, why are investors rushing in droves to invest in these strategies well, for one, they have been offering lower fee products to these investors, but perhaps more importantly these types of strategies do tend to be a lot more stable and have greater down side protection in the event of a correction or even a crash, guys. >> leslie, thank you be. algorithmic trading important. we're joined by andrew fishman, president at schoenfeld strategic advisers
10:33 am
tell me how your business has changed a bit in terms of the managers you're giving the capital to and the tools using in terms of quantitative. >> quantitative trading has become a big part. 65% is controlled by the machines. >> why >> over time risk adjusted performance has been better through the increasing use of technology. >> a day like yesterday where we see a lot of them going up, technology, big gainers going down people say it looks like that was driven by algorithmic trading. is that the case >> i think it's an easy excuse when the market shifts i don't think it's always the case it was a career rotation in the marketplace. i can't pinpoint to you why that occurs there hasn't been a big momentum
10:34 am
push other the last weeks. i think many people are making money on that momentum and we had a shift yesterday. >> is it all going to be machines one day >> i think there's still room for discretionary manual traders. a lot depends on time horizons i think like every industry, technology is slowly taking over more and more, but you need people in a program, you need people to interpret. it's a combination of man and machine. >> has it ever been stress tested what happens during the next crisis >> obviously people like to think back to the 2007 crisis. the markets are different. machines are different we're not so worried about which way the market goes. >> quantitative encompasses almost everything. it's as ill defined as hedge fund these days. where within the quantitative
10:35 am
strategies, what seems most interesting to you where do you tend to tilt more is there more turnover in those strategies does it work for a while and you have to quickly jump off on to something? >> that's a good question. quant is a big word. we trade markets around the world. we tend to be more in the medium term time horizon. it decays on a 9 to 18 month type of time horizon evolution, adaptation keeps refreshing algorithms and they last for years. >> mostly statistical overturns. >> you're not taking long views about companies and where they are. >> price volume is at the core but i think these days traditional reversion which is at the core of quant models is
10:36 am
there. you have fundamental analysis, quantitative analysis >> so when we talk about a quant manager, are we talking about somebody with a background in computer science, rocket science, physics i don't know. >> we have a variety of different backgrounds in our managers computer scientists, physics, mathematicians, statisticians, bioengineers, chemical engineers. so you run the whole gamut of people who understand how to handle large amounts of data and make sense of that data. >> right probably don't even know gm makes cars thank you so much for joining be us. >> thank you >> thank you, michael. when we come back, the drama continues to unfold between the president and the nfl. we'll bring you up to speed on the latest and what it means for the league, plus four college basketball coaches among a group facing federal charges of fraud and corruption
10:37 am
this story breaking just this morning. we have details for you next
10:38 am
10:39 am
10:40 am
breaking news. in sports business on that bribery and fraud arrest that we're just learning about, our eric chen has been going through the complaint from the u.s. government which is alleging ncaa coaches received bribes to deliver players to an adviser or agent. what else can you tell us? >> a jaw dropper from the u.s. attorney's office here in manhattan investigating bribery among college basketball coaches, sports agents,
10:41 am
financial advisers and at least one apparel executive. they're influencing student@leads to pick an adviser. chuck person at awe bern evans at arizona state and tony bland at the university of southern california. also named is jim gatto. the head of global sports marketing at adidas. they're full think cooperating with the authorities u.s. attorney's office is going to hold a news conference coming up at noon sara, back to you. >> eric, thanks very much. we'll come back to you once we get that further news from the news conference. meantime, president trump's war of words at the nfl continuing this morning the president twieting that ratings are way down except before game starts when people tune in to see whether or not our country will be disrespected the booing at the game last night when the entire dallas team dropped to its knees was
10:42 am
the loudest i've ever heard. great anger. they stood up for the national anthem big progress being made. ♪ ♪ joining us to share his thoughts, drew rosenhouse. good to see you. we have a further tweet from the president essentially suggesting that the nfl should create a rule to force everybody to stand for the anthem given what we saw over the weekend with that show of unity among team owners, players, everybody else, seems like it would be a hard sell where do you think this is going? >> that'll never happen. players have to have the freedom of choice, the freedom to express themselves i don't see the nfl, the nfl pa agreeing to that where i see this going is president trump created a real problem with the way that he, in
10:43 am
my opinion, very ignorantly called out players as a whole, referring to them as sobs and that they should be fired without paying any attention to why players choose to protest or kneel or sit without knowing who these players are, what they represent, why they feel the way they do. just to call for people to get fired and label them sobs is very troubling to me from someone who's supposed to be the leader of our country. how can you -- >> yeah. yeah >> -- call people that there are great people in this league, many of which are protesting you cannot just insult them like that and now you're creating a bigger backlash of players who are going to stand up against
10:44 am
him basically calling them out and insulting them unfairly. >> i'd like to get your perspective from the owner's point of view. quite a few of them took the field with their players, locked arms in the case of jerry jones, get down on their knees. cowboys are worth $4.8 billion according to forbes latest numbers. what's going through his head in terms of how you have to navigate this when you have guys like jones and kraft in new england who have been supportive of president trump >> i think everyone knowse jerry jones and robert kraft are great patriots, great supporters of this country because you kneel doesn't mean that you don't respect the flag or the anthem or this country or that you're insulting the
10:45 am
military that's absurd. that's not what they're doing it for. they are trying to get people to think about and take steps towards social injustices, inequalities i don't know of anyone in the nfl that has in any way an intention to insult the military, the national anthem or the great american flag. this is not about that when owners get involved, when coaches get involved, it's to support the reason for kneeling. the reason is that players in the nfl are concerned about many of the inequalities and donald trump is an example of that. for him to come out and call nfl players sobs and that they should be fired and not take that stance with nazis and white
10:46 am
supremacists is scary. and it will only empower more players and people to take action against that type of rhetoric, especially from our president. >> well, we'll see, you know, how they continue to protest i'm sure we haven't heard the end of this. the president still tweeting about it, drew i wanted to get your thoughts on the other breaking story out of the sports world when it comes to basketball. these allegations of fraud and bribery for coaches. that's college basketball coaches and also an arrest for jim gotto, the director of global sports marketing for basketball at adidas whose named as a defendant allegedly conspiring to pay coaches -- conspiring with coaches to pay high school athletes to get them to play at high schools sponsored by adidas. very complicated long complaint what strikes you as you hear this about how widespread or probable this sort of conspiracy
10:47 am
is and just how deep it goes something that the fbi has been investigating since 2015. >> i'm all for sports being cleaned up i'm all for sports being pure. i'm opposed to paying players an breaking the rules and influencing players whether it be agents, coaches, administrators, marketing compani companies. there's no place for that in amateur sports players should be choosing colleges because of academics and sports not because of money. players should be choosing companies to represent them to do product deals after their eligibility is up. players should be choosing agents for all the right reasons, an agent's credibility, professionalism, his experience, his integrity, not because the runners and people giving money,
10:48 am
not because of fraudulent conduct. i'm not going to -- yeah, i'm not going to cast aspersions on people that have not been found guilty yet, but i'm all for sports being cleaned up and all of the kudos to the fbi. kudos to them. >> sure. i'm curious from your perspective just how competitive it is to get some of these athletes at various universities at a college basketball level and where the apparel manufacturers fit into that. >> i'm not an expert on what the apparel manufacturers are doing, but i can speak as an agent that it is a rampant problem in sports basketball, the nfl where big contracts exist. rules are not being followed amateurism is being broken agents, administrators, coaches, there's a lot of dirty stuff that's going on. i for one am all for the fbi, the states, federal agencies,
10:49 am
the police to get involved and clean it up. follow the rules do it the right way. there's no room for cheating in that capacity. >> all right drew roserosenhaus, thanks for weighing in. let's send it over to jon fortt now. get a look at what's coming up on "squawk alley." word is you have a software company ceo on this morning, john fairly well known company. >> little software company, microsoft ceo satya nadella is going to join me here at the nasdaq to talk about his book out today, "hit refresh" about the like artificial intelligence, the future of security, privacy, and more. that's coming up on "squawk alley"
10:50 am
is the monolithic view of emerging markets obsolete? at pgim, we see alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce.
10:51 am
trade and travel surge between emerging markets. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential.
10:52 am
it is time to go to the cme group. rick santelli with the santelli exchange rick >> good morning, and thank you, sarah. well, we get our last look at second quarter gdp this week, and i think what's very interesting is if we look at atlanta gdp now, it's 2.2. so let's just look at the layout of the 2017 thus far the first quarter was 1.2. i will assume the 3.0 that we
10:53 am
saw our second look for second quarter gdp, which we're going to see for the last time this week will remain at 3%, and i'll plug in the 2.2. tell you what, you're going to need a spectacular, i mean a spectacular fourth quarter to get into that 3% camp. when was last year we had 3% 2005 q1 was 4.3, q2 was 2.1, q3 was 3.4. so we barely made it it was 3.025 in terms of taking those four quarters, which each one is an annualized clip, putting them together and coming out with an actual year that matched up to 3% i know there's a lot of ways to look at gdp. this is the way i'm looking at it the reason i think it's important is, because i think there's a lot of lessons that we can be learning from the markets. when i looked at today's consumer confidence, university of michigan, i know they are called soft numbers and many like to take the temperature of
10:54 am
those respondents/investors, because mindset is an important aspect of investing. the fairy dust of why investors do what they do. some of it is very hard to quantify those have remained firm, but those haven't taken us where we need to go and really since november they've skyrocketed, and i find that interesting, as well you know, i brought up at the german elections outcome didn't have the impact in the marketplace the u.s. did and i have interesting e-mails that that was a strange way to look at it. you know, i don't think it's a strange way at all, because i think most of you out there are befuddled. you know, was it what this presidential administration hopes to payout? doesn't correlate. failures in legislation don't seem to take anything out of the market it's got to be more. i think a lot has to do with status quo versus nonstatus quo, even if the way you get there and break eggs is messy. and finally, when i look at markets, i think a lot about the current football situation not a subject i really want to weigh in on, but i remember a time i used to talk about the markets on cnbc and politics was
10:55 am
always part of the markets, but not like it is today just like football listen, no matter what your thoughts are about football, one thing we can all agree on, politics invades everything. the reason i bring it up is because i think 3% growth is highly possible, and i think many analysts and economists fall into the politicized trap of taking what we can do from the economics standpoint and making it all messy and dark with politics. sarah, back to you >> all right, rick, thank you very much. for not waiting until the nfl scandal, sort of when we come back, microsoft ceo satya nadella is sitting down with our very own john ford that interview is comingp uin just minutes on "squawk alley. we'll be right back.
10:56 am
10:57 am
10:58 am
i'm hampton pearson in washington, where jay clayton is on the hot seat before the senate banking committee he was supposed to be focused on the recent breach of the s.e.c.'s edgar system, but there are far more questions about equifax and the sudden resignation of its ceo today here's an exchange with ranking member sharon smith and mr. clayton. >> do you think it's appropriate, mr. chair, for the executives who ran the company during the massive breach that
10:59 am
they get to retire and keep their bonuses and stock awards >> again, senator, that is a specific matter, a matter that may come before the commission, may come before me to make decisions. it would be inappropriate for me to comment on that specific matter do i believe that if executives have profited from a high stock price that's a result of failure to disclose other acts that are clearly violations of our securities laws, should there be an ability to get back those gains? yes, i do. >> and the concern about equifax, by the way, on that committee has been bipartisan. the hearing is continuing. sara >> hampton pearson, thank you for the update good morning it is 11:00 a.m. at equifax headquarters in atlanta, 11:00 a.m. here on wall street, and "squawk alley" is live ♪ ♪
11:00 am
good morning again, welcome back t


info Stream Only

Uploaded by TV Archive on